Walmart, the nation's biggest retailer, is pulling the plug on its health clinics, stepping back like other companies that have found that providing primary care to patients is a difficult and often unprofitable line of business.

The Bentonville, Arkansas, company with 4,615 namesake U.S. stores said on Tuesday it is closing all 51 of its Walmart Health centers in five states — Arkansas, Florida, Georgia, Illinois and Texas — and shutting its telehealth unit. The first healthcare centers, typically located next to Walmart Supercenters, debuted in 2019. Shutting them was a tough but necessary choice, Walmart said on its website.

"Through our experience managing Walmart Health centers and Walmart Health Virtual Care, we determined there is not a sustainable business model for us to continue," the retailer said. "This is a difficult decision, and like others, the challenging reimbursement environment and escalating operating costs create a lack of profitability that make the care business unsustainable for us at this time."

Retailers such as Walmart, and e-commerce giant Amazon, envisioned healthcare as a growing opportunity because America is aging. For example, last year Amazon paid $3.9 billion for One Medical, a group of primary care clinics.

But Walmart has been joined by chains in finding that offering primary healthcare is financially challenging. In November 2022, Walgreens Boot Alliance''s VillageMD said it was buying Summit Health and CityMD, an urgent-and-primary-care chain, for $8.9 billion. Then in October it said it planned to shut 60 VillageMD locations and has since expanded the scope of those shutdowns.

"As Village prioritizes density in their highest opportunity markets, they decided in January to exit a total of approximately 160 clinics inclusive of the 60 that had been previously communicated," Walgreens CEO Timothy Wentworth said on a fiscal second-quarter earnings call in late March. "As of today, they have already exited 140 locations."

During a question-and-answer session, Manmohan Mahajan, global chief financial officer, added, "Village[MD], we expect to continue to drive growth as they focus on the core markets as well as continue on their cost actions that they are going through this year."

The healthcare sector has been a difficult one for traditional retailers to crack, according to Neil Saunders, a retail analyst and managing director of GlobalData.

"Walmart isn’t the first, and it won’t be the last, retailer to stumble in the healthcare market," Saunders said in an email to CoStar News. "While, in theory, Walmart should have had a shot in primary care because of its convenient locations, making the business work financially is extremely challenging. Walmart is used to serving consumers directly and having them pay for products and services. Healthcare isn’t like that. It’s a complex web of interested parties and Walmart having to deal with insurers for reimbursements has been problematic."

Walmart declined to comment on Saunders' remarks.

Drugstore chains have also taken a hit, with CVS Health and Rite Aid in the Top 10 in terms of store closings this year, according to Coresight Research. But Walmart won't be reducing the number of the chain's nearly 4,600 pharmacies and more than 3,000 Vision Centers, according to the retailer.

"Over the past few years, the importance of pharmacies has continued to grow, and we have expanded the clinical capabilities of the services we provide," Walmart said. "We continue to offer immunizations and have grown to provide Testing and Treatment services, access to specialty pharmacy medication and care, as well as other essential services such as medication therapy management and a variety of health screenings. With more than 4,000 of our stores in medical provider shortage areas, our pharmacies are often the front door of healthcare."

Walmart's optical business is also growing and recently expanded with more than 200 Vision Centers brought under the company's ownership, according to the retailer.

Saunders compared Walmart to e-commerce juggernaut Amazon in terms of their experimentation and willingness to shelve brick-and-mortar initiatives that they're not satisfied with.

"Overall, Walmart is performing well but with inflation slowing it is coming into a period when there will be more pressure on the top line," Saunders said. "That means the company must double down on efficiency to ensure it delivers on the bottom line. The scrapping of this healthcare initiative is part of Walmart becoming more focused on things that make it money rather than spreading itself too thinly into many different areas. In some ways, there are shades of Amazon about this: experimenting and testing things and withdrawing quickly from initiatives that don’t work."

Amazon has shut several of its brick-and-mortar initiatives, including its book stores.

Walmart plans to continue experimenting, it said in its statement.

"Our culture of innovating and trying new formats and services has helped our company become stronger and better able to serve customers," the retailer said. "We will continue to innovate as we grow our core businesses and launch even more services like the Walmart Healthcare Research Institute and health programs to join our fresh food and [over the counter] offerings in helping our customers live better."

All employees at the Walmart healthcare centers are eligible to transfer to any other Walmart or Sam’s Club location, the company said. All workers will be paid for 90 days, unless they transfer to another location during that time or leave the company. After 90 days, if they do not transfer or leave, eligible workers will receive severance benefits.